Analysis of the External Environment of Business

Analysis of the External Environment of Business

The Technological Environment

The external business environment consists of four elements, they are as follows: Political, Economic, Social and technological. It would be impossible to analyse the whole environment in one essay, I have therefore decided to focus my essay on the technological environment. I have chosen this area to focus on because as Palmer and Hartley point out, it is one area that is forcing immense change in the external business environment.

'The business environment is at present moving through a dynamic and turbulent phase driven by technological change, globalization and increasingly competitive markets' (Palmer and Hartley 2002).

I will be researching and analysing the major changes that have taken place in the technological environment over the last ten years and explore how they have affected business practice. I will also be discussing how these changes have implicated on the Public Relations Industry.

Technology is defined as:

'the sum of knowledge of the means and method of producing goods and services' (Bannock et al 2003).

This authoritative definition of technology assumes technology only refers to the artifacts themselves rather than the way they are used and the theories governing their application. Human knowledge however, is an essential ingredient of technology and I therefore prefer the following definition:

'The application of available knowledge and skills to create and use materials, processes and products' (Needle 2004)

This wider definition relates the application of knowledge to the wider processes of business practices i.e. the production and promotion of goods and services. Further it indicates how technological developments are relevant to public relations.

Technology refers to the organisation of production as well as the actual techniques of production itself. Investment in technology and innovation is frequently seen as a key to the success of an enterprise and has been used to explain differences in the relative competitiveness of different countries. As Worthington and Britton point out:

'the development of quartz watches, which allowed Japan to enter the market and compete with Switzerland' (Worthington and Britton 2003)

As this example shows the more Japan invested in technology the more competitive they became with Switzerland.

Technological changes over the last ten years have transformed many business activities and created entirely new ones. Some of the major changes have been in I.T (information technology) which has affected many every day business activates.

Administration is one area that has been transformed by developments in I.T. Due to the drop in cost of computers and the increased use of e-mail as the primary form of communication; many businesses now have networked computers to enable better internal and external communication. Businesses are also able to store data in electric format rather than on paper saving both space and allowing easy access to information. These developments have resulted in significant economic benefits for businesses which have allowed them to invest in other areas such as research and development and human resources both aiding business expansion.

Production is another area that has benefited from advancements in I.T. As Palmer and Hartley point out new manufacturing techniques are the driving force behind these advancements:

'The introduction of software packages has enabled existing products to be made more profitable and has helped create new products' (Worthington and Britton 2003).

An example of this software is CAD (computer aided design) which has had a significant affect on the consumer electrical goods industry, because it s allowed the design and production processes to be speeded up.

Perhaps of all the developments affecting the business environment the unprecedented expansion of the internet and the development of a global communication network has been the single most important influence on the twenty first century business environment. The sheer number of people connected by the internet has meant globalization has become a reality for all businesses regardless of size. As Worthington and Britton illustrate:

'In February 2002 there were an estimated Ј544.2 million people wired to the internet' (Worthington and Britton 2003)

The size and potential of global markets facilitated by the internet is unrivalled by any single country or market.

As I have illustrated above developments in I.T have had major effects across the business networks. One of the main results of these changes is the emergence of new markets particularly on the internet. For example in the financial sector there is a new market of online providers, such as E-sure, Egg, Capital One etc. They are all able to gain competitive advantages due to the low operational running costs of online businesses.

Product and process innovation is another area of technological change. One of the effects of product innovation has been that expertise in a particular technology is no longer a barrier preventing competitors entering an industry. New entrants in an industry can benefit from the falling costs of technology or may be able to bypass the traditional technology by using some new and alternative technology. Palmer and Hartley provide a number of examples of this type of change:

'Consider some historical antecedents: Bic produces a disposable plastic razor to rival Gillette and Wilkinson, fountain pen challenged by the ball point pen' (Palmer and Hartley 2002)

Failure to keep on top of changes in product innovation can literally mean being overtaken by a smaller more innovative company.

Process innovation on the other hand impacted hugely on the cost of production and the ability to expand product ranges.

The introduction of mass production in the car industry, for example has allowed car manufacturers to offer low budget but reliable cars to people who would have otherwise been unable to afford a car.

As I mentioned previously the introduction of CAD has allowed business to offer

many